An estate planning includes various written documents that outline one’s wishes and how they would like to allocate their assets upon death. Organizing one’s estate becomes increasingly crucial after marriage. It makes sure that their spouse and children are financially stable should they face the unexpected. When an individual gets married, their legal and financial status changes in various ways. A spouse can file joint taxes with their partners. Once recognized by the government as married individuals, income and property sharing become common and affect assets’ distribution. To understand property recognition as a couple, it is important first to understand the working of separate and shared property.
Purpose of Estate Planning
Estate planning serves multiple purposes, ranging from controlling assets to lowering taxes. Devices of Estate planning include wills, trusts, living wills, gifting, creation of limited family partnerships or real property. By using these tools and documenting one’s wishes beforehand, one can , control their assets, specify medical treatment, avoid family disputes, lessen taxes and legal fees, choose an administrator, Etc. It involves putting one’s financial, legal and medical affairs into place. It is imperative to put one’s affairs in order. Neglecting to address these affairs on time can lead to legal complications.
Estate planning and Marriage
Estate planning is all about strategy, even though the goals of most married couples are the same when it comes to Will and Estate planning, some married couples have different opinions on the ownership of property and beneficiaries. In the case of property, there are divisions, Separate property and Marital property. Separate property is what one owned before marriage and to which the spouse has no rights whereas Marital property is what one shares with his/her spouse and is jointly owned between the two. Property classifies differently after marriage. If one wants to keep their assets independent from their marital property, they can create a Prenuptial Agreement.
Apart from this, it is also essential to decide whether an individual and their partners should use the same lawyer or separate lawyers. Many times it is possible that spouses are uncomfortable asking questions to their partners, for example, what happens to the estate in the case of a divorce, in such cases they can appoint different lawyers whom they trust.
Methods of Joint Estate Planning
Joint ownership mainly comes in three forms—joint tenants with rights to survivorship, Community property and tenants in common. Joint tenants with rights to survivorship means that if there is more than one owner of the asset then upon the death of one owner, the surviving owner will continue to own the asset. The creation of Joint tenancy takes place when two or more people own the property, and the interest is undivided between the two. Community property is the property gained by the couple during marriage which is held equally by them. Community property includes any property or salary earned by the couples during the course of their marriage. Tenants in common means that if the property has two or more owners, then they hold a certain percentage of the property; however, the percentage of ownership may not be equal.
Advantages of Joint Estate planning
The main advantage of joint tenancy is that it helps one escape probate of the assets and saves legal fees, which otherwise one would have to pay on the estate assets at the time of death. The ownership immediately transfers to the surviving tenant with the real interest and zero probate process. Joint tenancy with right of survivorship gives the owner full rights to the property and avoids Will contests which means that it can prevent a partner or a child from challenging the Will against the assets. Owning joint property also gives one peace of mind that after their death, the person they want will receive it.
Disadvantages of Joint Estate planning
When a couple owns an asset, they automatically become responsible for it. This means that they enjoy all its positive aspects as well as all its liabilities. That means that no partner can suffer debts on the asset without indebting oneself. If one partner takes out a loan, he/she is equally responsible for repaying it. In case there is not a Will, then the court freezes the asset, and this can prove to be a problem for the surviving spouse if they have many bills to pay. Joint ownership can also be a problem in case of an unstable relationship; if the partners disagree, it can be challenging to take necessary actions.
Needless to say, it is vital to carefully weigh all options before considering joint ownership with another individual. Even though it is easy to create, it can become tough to manage. Hence, advice from a professional can be helpful in such cases. Individuals should assess their situations and choose the more favourable option before making arrangements.